Making Currency Exchange Less Foreign

It dwarfs the New York Stock Exchange. The more than $10 trillion daily transactions in the foreign currency exchange market makes some few fabulously wealthy, while crushing all hope for profit out of many an unwary business venturer. Like language, we have grown up with everybody accepting our own, and we find the tongue or currency employed by other lands to be, well, really foreign.

For those folks who never grasp opportunities beyond their native soil, the language of foreign current may as well remain a mystery. Yet those business people seeking sources, resources, clients, vendors, or suppliers from the increasingly global pool, will want to learn the required strokes for swimming in international finance. To help keep fiscal heads above water, Leslie George is bringing much needed aid and counsel to small and medium-sized companies that trade or operate abroad.

Three months ago, George imported the established expertise of Canadian-based Bendix Payment Solutions to his New Brunswick offices. Here, as managing director of Bendix’s first American presence, George and his team profitably guide business folks in money transfers, customizing currency hedge protections for international trades, and maintaining their cash value in all kinds of commerce.

This is actually George’s second from-scratch launching of a currency services firm, and he holds a remarkably cool head for such a complex challenge. George was born in the Virgin Islands and grew up in New York City. His father was a barge captain by trade who also worked at various resorts in the islands, and his mother was a homemaker.

Graduating from Georgetown University in 1981 with a bachelor’s in economics, George kept his eye on the money. When Thomas Cook Group acquired its own Currency Services Corporation, George hopped on board. He soon worked his way to regional sales manager of the USA Northeast sector.

After a brief stint with Roche International, George joined Cambridge Mercantile Group, where he opened that currency services firm’s first U.S. branches. In less than 12 years, he developed all the processes, hired the team, trained the 35-member sales staff, and moved the branch assets to $2.6 billion. Flushed with the entrepreneurial spirit, George now is striving to create the same success for Cambridge competitor Bendix.

Beware the banks. That friendly bank that handles your payroll and revenue streams may not prove nearly as helpful when it comes to guiding you through the foreign currency maze. “The main reason is size,” explains George. “We’re talking a $10 trillion market here. Banks tend to give top attention, advice, and rates only to the major players who regularly transact in the hundreds of millions.” Smaller players are typically outsourced, meaning that the personal relationship vanishes, and outside additional fees pile up.

One old trick is for the U.S. businessperson who deals frequently with a foreign partner to open an account in the partner’s own bank to make transfers easier and provide standing for the American company. “That sounds good if you’re dealing in India,” says George, “but if you are transacting in Europe, the banks will eat you alive. European banks live and die by huge fees. The cost of maintaining your fiscal presence would devour all profits.”

As anyone who has ever traveled abroad knows, the foreign currency market is whimsically fickle. Keeping a well trained eye on this volatility makes the difference between profit and loss — and, as George hastens to add, the ability for the importer to sleep at night.

Hedging your bet. George’s team proffers scores of methods to protect the importer/exporter’s profits, but one of the simplest and most effective is by using a forward contract price lock.

“Say you’re a small Princeton importer who wants to buy a machine in Germany and sell it in California,” says George by way of example. “The German firm wants 1 million Euros for the machine they manufactured. Seems simple, but this is where market volatility sneaks in.” Today, the Euro may equal 1.30 U.S. dollars. The importer adds to that his five percent profit and invoices the California buyer for $1,365,000.

Alas, deals are not made in a day. Time changes all things, especially currency. Typically the importer may need to get the $1,365,000 before he can pay the German manufacturer. So Germany ships the machine and gives the importer 90 days to pay.

However, by the time the importer goes to exchange and pay the manufacturer his Euros, the dollar may have weakened to $1.37 to the Euro. Oops — profit vanished and our importer ends up having to pony up all his cash from the buyer, plus an additional $5,000.

“If this importer locks in his price with us,” says George “we can assure that he will maintain his $1.30 exchange rate until payday.”

Basically, the importer is shifting his risk to Bendix for the cost of a small good faith deposit.

For those who plan to transact regularly abroad, the time to seek out the counsel of a customizing currency services firm is long before the putting pen to contract. In shopping around for a good currency services house, ask about the following advantages:

• How do their exchanges rates compare with your bank and other available institutions?

• Where are their global accounts with rapid transfer and banking capabilities? Do they match your international locales?

• Do they offer a relationship? George prides himself on advising his clients. “When I see the Euro or Rupee is going to rise against the dollar, I quickly call my clients and try to optimize the timing of their latest purchase,” he says.

One of George’s greatest successes has come with his aid to a food importer who had simply given up on European imports. The Euro was twitching so rapidly against his profits, while his bank offered ample fees but no advice. He tried to get his European suppliers to take dollars, but they did not relish the idea of having the risk shifted onto their shoulders. Through a series of lock-in contracts and exchange fluctuation warnings, George has this importer back bringing in the European delicacies.

Money is the blessed sap of business, and it flows most erratically across one’s national borders. Yet with authoritative counsel, it becomes less a case of let the importer beware, than let him prepare.